TAIWAN Law and Practice Contributed by: Lihuei Mao (Grace), Dennis Yu and Christina Chiang, Lee and Li, Attorneys-at-Law
Tax Incentives for Individual Angel Investors Individuals who invest a total of TWD1 million in cash in a year in a designated high-risk start-up company that has been established for less than two years can deduct up to 50% of their invest - ment amount from their annual taxable income. The maximum annual deduction amount allowed is TWD3 million. Deferred Tax for Stock Issued to Creators Creators (such as academics or researchers) who receive stock from academic and research institutions can hold the stocks until the time of transfer, at which point they will be taxed based on the transfer price or market price of the stocks when they received the stocks if the transfer price is higher, so as to promote the industrialisation of research results. In addition, according to the Limited Partnership Act, the Statute for Industrial Innovation and the interpretation of the Ministry of Finance, venture capital businesses established under the Lim - ited Partnership Act (ie, in the form of a limited partnership, rather than in the form of a corpo - ration) may qualify for “pass-through taxation” if they meet certain conditions. For example, where the total contributed funds of the limited partnership reach TWD300 million with 50% of the funds being invested in Taiwanese compa - nies or offshore companies whose main busi - ness operations are in Taiwan, and 30% of the actual investment is invested in new start-up companies, or the aggregate actual investment amount reaches TWD300 million (whichever is lower). This means that the venture capital busi - ness itself is not subject to business income tax, and the capital gains are only taxed as income tax when distributed to the limited partners. This helps to reduce the disparity in tax treat - ment between venture capital funds in the form
together with angel investors and domestic and foreign institute investors. • Eligible start-ups include: (a) start-ups registered in Taiwan or overseas start-ups whose main business opera - tions are in Taiwan; (b) those established for less than five years; (c) those with a paid-in-capital or fundraising size of less than TWD100 million (around USD3 million); and (d) with the consent of the NDF’s investment review committee, start-ups which do not meet the above restrictions. • The NDF has the following investment caps: (a) its fundraising per start-up shall not exceed TWD20 million (around USD670,000), which can be increased to TWD30 million (around USD1 million) if the start-up meets certain requirements; (b) its total investment per start-up shall not exceed TWD100 million (around USD3 million); and (c) its and other state-owned entities’ accu - mulative shareholding in one start-up shall not exceed 50%. As of the end of 2024, the NDF Business Angel Investment Programme had invested in 277 start-ups with an accumulated investment amount of TWD3.92 billion from the NDF and TWD14.83 billion from other co-investors. It is reported that the NDF might appropriate an additional TWD5 billion (around USD167 million) to this programme to incentivise investment in Taiwan-originated start-ups. 4.2 Tax Treatment The Statute of Industry Innovation provides incentives to individuals investing in start-up companies, as well as creators in academic and research institutions as below.
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